At least in my state (Washington), CPS prefers to relocate kids to nearby family members over actual foster homes, for what I hope are obvious reasons.
There is always a balancing of false-positives vs. false-negatives, in any attempt to restrict any behavior. And while I agree that the consequences of the false-positives are dire, sometimes unthinkable, CPS and its power to remove children from their homes is in response to something also dire and unthinkable.
You seem to be arguing that the consequences of a false positive vastly outweigh the consequences of a false negative. Viewing the consequences of an admittedly light-duty false negative (that is, abuse or neglect that, for one reason or another, hasn't received a CPS response), and being on the periphery of another much worse false negative (via contact with a member of the jury), I am uncertain.
Which is worse? Lacking the power to remove a child from a bad situation, or occasionally sending a child into a bad situation? I don't have a good answer for that question. I just disagree with the idea that either is indisputably worse than the other.
Its awful that there is a situation that we have to choose at all. And unambiguously, the foster system must be reformed. The OP even quotes the family's lawyer as saying that CPS disproportionately goes after poorer families ("neglect" and "poverty" can look the same, even if the cause is wildly different). But I do not think the foster system is so broken that we should abolish CPS entirely and just accept actual child abuse as unpreventable.